Fundamental Analysis

There is a crucial question in financial markets, how market participants forecast their future market progression. Financial market participants are often categorized related to two different forecasting approaches, Fundamentals and Technical. Stock analysis is vital when deciding to invest and when evaluating investment strategies.

Regular market analysis can ensure to make the most out of your investment, meanwhile minimize the risk. Some investors prefer fundamental analysis while others prefer technical one.

Fundamental analysis is the technique of predicting the future price of an asset which an investor want to trade. It is related to the examination of the worth of a company to evaluate if the current price of the market is fair or not, it means understanding if it is overpriced or underpriced. It is believed that taking into consideration the economy, strategy, product, financial situation and other related factors will mirror the market and provide consistent gains to the investors. It is necessary to analyse the forces that affect the interest of the overall economy, industrial sectors and company. It tries to forecast the future movement of the assets prices using those signals from the economy, industry and company. It asks for an examination of the market from a wider perspective.

  • Quantitative and Qualitative Fundamental Analysis:

The point with defining the word fundamentals is that it can cover anything which has to do with the economic well-being of a company. They include numbers like revenues and profit, but they include things like company’s market share to the quality of its management.

The fundamental factors can be grouped into two categories: quantitative and qualitative. By definition these terms mean:

► Quantitative – capable of being measured or expressed in numerical terms.
► Qualitative – related to or based on the quality or character of something, often as opposed to its size or quantity.

As you can understand, quantitative fundamentals are numbers.They are measurable characteristics of a business. This is the reason why the main source of quantitative data is financial statements: revenue, profit, assets, and more can be measured with great precision.

The qualitative fundamentals are less tangible. They might include the quality of a company’s key executives, its brand-name recognition, patents, and proprietary technology.